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tv   Bloomberg Markets Americas  Bloomberg  October 17, 2017 10:00am-11:00am EDT

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top stories are the we are covering from the bloomberg and around the world. banks are in focus as goldman sachs and morgan stanley report earnings. morgan gaining, goldman falling. we will explore why the shares are heading in opposite directions but in politics, tensions heating up between the u.s., canada, and mexico come as the fourth round of nafta renegotiations draws to a close. the u.s. is said to be getting more extreme in its demands. and what economic goals might china set as it is getting ready to hold at twice-a-decade party congress? we will discuss the issues in beijing. we are about 30 minutes into the trading day and a julie hyman is here. julie: not much change in stocks
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in the u.s. after all three major averages reached records yesterday. the focus is more on individual companies reported earnings, and we are heating up in that department. a lot of companies reporting today and over the next couple of weeks. we are closer to a milestone. it is not the universe -- not the anniversary of black monday, although that is approaching as well, but we are going to match the longest streak ever without a 3% decline in the s&p 500. if you look at the bloomberg, the last time we had that kind of streak from january 1995 to january of 1996, that was 247 trading days. as long as we don't see a few percent pullback this week -- 3% pullback this week, we will match that or exceed it. the blue line is this week back into the mid-1990's. health care shares of the best-performing stock today, and that is led by united health, the nation's largest health insurer, came out with its
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earnings. the medical loss ratio is lower than it had anticipated. its medical spending by its customers fill in the third quarter. analysts say it bodes well for the other insurers, although not for things like hospitals. they are a victim of the lower spending. many insurers are going to beat reporting in the next week or so. we are also watching netflix today. for this i want you to take a look at the bloomberg. after-hourst the session into today. after earnings came out last night, shares rose. netflix reported big subscriber growth nearly 4.5 million 850,000 addedad, in the u.s. shares fell today. over the past 12 hours, we are seeing this decline here. the company will spend $18
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billion on programming, a third more than in 2017. that is giving investors pause. last but not least, the banks today. we have a next picture. morgan stanley shares gaining as the wealth management unit outperforms. goldman sachs, even know it performed well on its own investments, trading revenue decline. the shares are under pressure. up just have to percent after a small script investors pushing for a breakup of the bank. mark? mark: yes, julie, while a big investor disagrees with everything that the small investors are saying -- give credit suisse time is when he is saying -- we will get to that later. highest since june 19. banks among the best-performing industry groups. utilities and auto among the
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other top performers. earnings season well underway. getting a bit of a boost from rising birthrates in china. sales growth accelerated to the fastest pace in two years and the third, because of a rebound in demand in china for baby food and bottled water. three. in china -- the rebound in china boosted the chief executive as he tries to resuscitate the largest business can yogurt and fresh gary cohn which has not had shipment growth -- yogurt and fresh da would justir not had shipment growth in years. y, second-quarter revenue beat estimates, including ramy martin cognac sales in asia. isand for its cognacs improving in china after it opened a retail store in beijing , the most louis xiii
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expensive cognac, which sells for $3000 a bottle. it cited strength in singapore and japan. shares have been at or near a record high lately on the growing demand for cognac in the united states from which accounts for 40% of the company's revenue. and spain is cutting its economic growth forecast for the next year, acknowledging the impact of the escalating political crisis that led the national court in madrid to jail catalan separatists. they are sending the impact of the political standoff in catalonia from which accounts output.t 1/5 of the spanish state turning up the pressure on separatist leaders as prime minister rajoy tries to persuade the catalonian president to drop his push for independence.
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spread,ermany, yield purple line. you can see the yield spread for spain and germany is lower than italy-germany. vonnie: great stuff, mark. 2 for wall street giants posting third-quarter results today. goldman sachs has continued weakness in the fixed income trading units, 26% decline. it was better than estimates, though. wasan stanley, meanwhile, shielded from the same bond trading slump that affected its rivals. joining us is gerard cassidy, managing director of equity research at rbc capital markets. he has outperformed on morgan and sector perform on goldman. are you considering changing now? we are analyzing the data right now. the numbers came out this morning and we had a large equity gain get goldman did not
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beat expectations. they, like the others, you identify this, the trading area for the group is the weak spot, on average come when you look at the five large capital market players. on a year-over-year basis, itigan down the most and c down the least. vonnie: what about the idea that wealth management is helping of these banks? to dependent on the economy? interesting is about wealth management, it is one of the areas doing well, and it can be partially attribute it to the strength of the global equity markets, particularly here in the united states. due to the rising values. else have youwhat taken away from the big five? take away fromhe the big five, from your perspective? gerard: regarding the outcome it
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is going to be interesting, because the volatility in the fixed income and equity markets has been very low. with the fed will -- with the going into ave land that will pick up momentum in 2018, there is increased probability that volatility will pick up, which is what the trading houses need. in terms of the other businesses advisory, the m&a activity, very strong for goldman sachs this morning, that business was quite strong. equity capital markets were acquainted debt capital markets were better than the equity capital markets, led by a lot of the strong credit quality issues that were issues. mark: how closely are you keeping an eye on who could well be debated to be the next fed chair? john taylor seems to be top of the plow come his start in the ascendancy. when it comes to the chair and view onson's
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deregulation, how are you waiting things -- waiting things and the potential impact on banks? gerard: i think you put your finger on something, because of janet yellen is replaced him and i think the consensus is that she will be replaced, whether it or another one identified as a potential replacement, these gentlemen are more hawkish than janet yellen. they also are bigger believers in less regulation. if one of these players comes in to replace her and it will lead to greater volatility on top of the online, but also, less regulation. we have already seen it with the treasury white paper that came out in october, that the treasury is pointing to less regulation in capital markets. the new vice-chairman of safety and soundness for the federal reserve, he has been identified as somebody who supports less regulation.
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this is all positive for this group as we go into 2018. vonnie: in some ways, it feels like the net interest income is not even the most important part of earnings on the balance sheets right now. orhe were to tighten faster the fomc, it would not make that much of a difference to the bank's bottom line. gerard: depending on the bank. for goldman sachs and morgan stanley, you are spot on. but for bank of america, which owns merrill lynch, it would be very important, as it would be for j.p. morgan chase and the regional banks. interest rates would be very important depending on the bank. but for the pure capital market players, you are right, it is not as important. vonnie: i have to ask you about the $2.2 billion share buyback for goldman sachs. are you surprised? what does this mean for investors in a gs and the other banks? gerard: gerard: this is a
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critical component of why investors should own the banking group. it is an overcapitalize group. it will continue to give back excess capital through chair repurchases, like you describe for goldman sachs this morning. they came out and give the total number of $800 billion there will be stunning on return of capital today, a new number for them. what i would suggest is this is very important to why somebody would want to own a bank stock. you will see the dividend payout ratios can we believe, get 40% of earnings, and the total combined payout ratios, by back and dividend, exceeding 100% of earnings for some of these banks over the next two years. mark: 10 return on capital, one of your big themes, gerard, why you should own certain times of bank stocks. ,alk us through the other 2 included in those subsections. gerard: i think the risk-on valuation pieces of the
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investment team fit perfectly for bank of america and citigroup. you have seenw evaluations improve for these companies. they are not at valuation levels of their peers, but that will come in time if they improve their profitability. as the economies around the world continue to grow, you can take more risk, we believe come with equities, and therefore, bank of america and citigroup is the riskier investment, or are the riskier investments, versus u.s. bancorp, one of the regional banks that is the highest quality, or even j.p. morgan chase, for that matter. vonnie: gerard cassidy, thank you for joining us this morning. let's check in on the "first word" news. here is taylor riggs. trump'spresident nomination for drugs are has withdrawn his nomination. there were reports that he made it harder to fight the
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opioid crisis. ramping few latest round of nafta talks with a bombshell proposal, this is the administration wants to eliminate tariffs on supply manage contacts. candidate uses the system of tariffs and quotas for dairy products that they say guarantee stable pricing and production. canada has dismissed the proposal and we will have more on this at the bottom of the hour. despite a plea from president trump, former white house strategist steve bannon will not abandon his war against republican congressional incumbents. people keep asking insurgent candidates to pledge just mitch mcconnell. -- he will keep asking insurgent candidates to pledge to oust mitch mcconnell. qa has leftor raq thousands of civilians and
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fighters dead. much of the city is in ruins. global news 24 hours a day powered by more than 2600 journalists and analysts in over 120 countries. i am taylor riggs. this is bloomberg. vonnie: taylor, thank you. around $52 ag barrel now, as tensions in iraq ignite even further. we will be discussing. next hour, will the future of automobiles be one without gasoline? the latest on electric vehicles and autonomous vehicles with the president of general motors. he joins us in an exclusive interview. this is bloomberg. ♪
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mark: live from london, i am mark barton. vonnie: from new york, i am
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vonnie quinn. this is "bloomberg markets." time for "futures and focus." gold is extending its drop from a three-week high. joining us from the cme is the president of the epstein division of the linen associates. let's talk a little bit about oil. how much are traders closely watching the conflicts in iraq and the kurdish areas? will that dictate the price in the coming months? well, it is important because those are supply factors we watch. obviously, let's assume that first the president decides to put more sanctions on iran. as long as he stays away from the national guard, the revolutionary army, let's call it, not being a terrorist organization, i think he can get away with those. if he puts too many sanctions on, the question is, do our allies join in, and what does i ran do about it?
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that is a supply issue. in the current area of iraq and we have heard that the iraqi army has taken it back and production is back to normal. much of that is fluff or reality. we have to see that. iraqis say time, the they want to increase production of up to one million barrels a day in that region and build the refinery. those are things in the future. vonnie, i think the big issue for crude is why he is short going into the chinese party conference, which begins tomorrow. we don't know how long it will last. we know that china has grander ideas about oil. they are a big user. buy part ofng to sarpy aramco. these are all questions up in the air and none of that is bearish for crude at this point. vonnie: what in the china party congress have more of an impact on something like gold, for example, ira? ira: it depends.
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what if they say they want to grow the economy even more? it would be more about what they want to do to grow themselves. copper has taken off in price because infrastructure spending is so grand there. if they keep doing that, don't they need oil and other products?saudi aramco they are going public and may sell to a chinese investor. who knows if it is not the chinese government? vonnie: i rest in, we will be talking later on and hope you can tune in. that was "futures in focus." mark: time for the bloomberg "business flash," the biggest business stories in the news right now. johnson & johnson reported earnings that beat estimates. it raised its outlook for the full year.
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it held off competition despite losing patent protection. the u.s. department of justice scamoking into the data and the company says it will cooperate after prosecutors asked for documents. its ownlds said investigation -- kobe stilts has its own investigation will show that faking data has gone on for more than a decade. the sec has abandoned scanner corporation over the nuclear power project in south carolina. scanner says it will cooperate. it is already that target of federal and state investigations over its handling of the reactors. the company could be blocked from collecting billions in barely finished projects. toys "r" us is exploring options for its growing asia business, including an ipo, according to people familiar with the matter. as $2al could be as much billion. toys "r" us file for bankruptcy in north america. its issue unit is a joint
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venture with billionaire fund brothers. that is bloomberg "business flash -- that is your latest bloomberg "business flash." vonnie: china's most important political event kicks off tomorrow. elitel see as the ruling gathers in beijing for the 19th party congress. this is bloomberg. ♪
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mark: this is "bloomberg markets ." i am mark barton in london. vonnie: and from new york, i am vonnie quinn get china's communist party is about to assemble for the first national congress in five years. the on last week long event brings together rulers and the elite to discuss priorities and to replace top party leaders. tom mackenzie explains the path to power in china. there are four steps to the
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chinese leadership pyramid. first you have the party congress made up of about 2270 delegates. these are state leaders commit military generals, top executives. from there, the leadership pool is surprisingly small for our country representing almost 1/5 of the global population. the central committee has roughly 200 members. only 5% are women. the central committee officially has the power to elect the general secretary and members of other top committees. to advance beyond the central committee, you must meet certain criteria. age is a factor. 2002cedent was set in requiring standing committee members 68 or older to retire. aspiring state leaders need to reach each level at a young enough age to ensure their climb to the top. joined the central committee before his 45th birthday, and under current law can stay on until 2022.
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beyond age leaders hoping to advance beyond the central committee must have experience in high ministries, military units, and provinces. and a claimant to a top list in shanghai, hometown of former president shaanxi men, has been the most reliable springboard to state power in the last century. after the central committee, the next level is the politburo. this 25-member committee comprised of prodigies of regions and the officers of the military commission. this committee is a decision-making body. at the very top of this power pyramid is the standing committee. this elite body is always comprised of members from top state posts -- president, premier, and chairman of the standing committee. the remaining seats are occupied by leaders of central party agencies and omissions --
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commissions. and that is china's narrow path to political power. elite: as china's ruling gathers in beijing for the 19th party congress, bloomberg television will be there live. our special coverage begins tomorrow. still ahead, investors are weighing the impact of aggressive demands by the u.s. in nafta talks. we will talk to commerce and bill pascrell, ranking members of the house ways and means trade subcommittee, about the answers and future of nafta and the congressional agenda. that is next. this is bloomberg. ♪ retail.
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under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store
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near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. vonnie: live from bloomberg world headquarters in new york and london, i am vonnie quinn. mark: i am mark barton. this is "bloomberg markets."
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let's check in on bloomberg "first word." taylor riggs has more. taylor: in the u k, inflation has hit 3% for the first time in more than five years. the bank of england governor mark carney reaffirmed that the central bank is closed to the first interest rate hike in more than a decade. north korea is threatening that nuclear war may break out at any moment. regime issued a warning as the u.s. and south korea began drills off the coast of the korean peninsula. in north korean diplomat claims that the entire u.s. mainland is within reach of its missiles. it is a sign that manufacturing is back from the damage caused irma.rricanes harvey and arm the federal reserve says the hurricanes trimmed industrial growth by a quarter of 8%. and stanford university economist john taylor appears to have boosted his chances of
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becoming chair of the federal reserve. familiar to people with the matter, he made a favorable impression on president trump after an hour-long interview last week. one of those people says the president talked about taylor afterwards. global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. i am taylor riggs. this is bloomberg. vonnie: taylor, thank you. as the fourth round of nafta talks comes to a close, sparks are flying. the trump administration has laid out its most aggressive traded demands today as the administration pushes its "america first" agenda. there will be statements at 3:00 p.m. eastern. joining us from washington is bloomberg's eric martin, who covers the mexican economy, and just when growth, who covers the canadian government for bloomberg. both of you, the currencies in both of the countries you are covering are weakening, which is not really a great indication for how the talks are going.
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eric, let me start with you. how does the mexican government see the fourth round of talks. >> the mexican government knew that coming into this round, they were going to hear the most controversial and most difficult proposals from the u.s. coming here in washington. that this was the american home-court advantage, this is happening in the d.c. area, and they expected very confrontational almost, approached from the u.s. you have seen in the last couple theeeks that reflected in mexican peso which is fallen 6%, 7% since late september. vonnie: indeed, there is a correlation quite obvious with the canadian dollar. is the candidate government seeing the latest round of talks as a negotiation or series of ultimatums? >> i think it depends on which part of the talks we are talking about. we have 2 negotiations going on
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right now. they are updating and bringing it into an internet era. everyone agrees on those things. what they don't agree on are five of what you might call ," those kinds of things, where there has been no movement at all, and the canadian government has been raising warnings that these are not starters, in particular on autos, a sunset clause from which they say would hurt manufacturing in all three countries. manufacturingdo went inactive blows up every five years? we have seen a tone shift from canadians. josh, it seems that the u.s. is going to have to water down some of its demands if it wants a deal. eventuality? that we're talking government
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procurement, the sunset clause. any of it viable or not? josh: that is the million-dollar question. when mexico and canada are doing is giving the storm's statements today that they will have to back -- the u.s. will have to back down. until now, mexico and collaborative have been -- mexico and canada have been collaborative, saying we will stay at the table and things like that. we are seeing some of these proposals from the shock and all-type things, land like a bomb. if the u.s. does not want to ater down itsw wine, we could have many scenarios that donald trump could give notice of leaving and not actually do it. he could end up in a political fight with congress. it gets messy from here on out. mark: is there any optimism, eric, from your side? naftams like talk of mere
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tweaks are behind us. can you find common ground from the u.s. and mexican standpoint? eric: one of the things mexico is counting on here are the allies in the u.s. private sector and congress. we have seen in the last three weeks the u.s. chamber rising up and speaking out against the proposals that have been floated and are now granted by the u.s. negotiating team. we have seen members of congress talking about nafta's importance to their states. the national association of manufacturers from different groups. one of the things mexico is coming out is that trump will be facing pushback not only from mexico and canada, the other negotiating teams can but also from his own constituencies in the u.s. vonnie: we shall see. our thanks to you both. eric martin, our mexico reporter, and josh wingrove, who covers the canadian government for us. speaking of congress people with an interest in all of this and
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we have one with us now with more on the nafta negotiations, democratic congressman bill pascrell of new jersey, the ranking member of the ways and means subcommittee. you heard eric there. mexico is counting on congresspeople with a stake in the game, if you like. when input did your subcommittee half on any of what is going on right now? vonnie, we are getting briefed with all the meetings. we are in the fourth round, which will finish out today. fifth-round will be in mexico. negotiations are moving very quickly. if you look at the schedule, our trade rep wants it done by the end of december. eriod,will be a 90-day p and we will vote sometime in april or may, if the negotiations continue to go as they are going. ,onnie: you give me a timeline
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but we are talking about a substantial trade agreement here, and the idea that the u.s. is putting the hammer on mexico and canada, there may be no agreement. rep. pascrell: well, we want to have a renegotiation, no two ways about that. we don't want to blow up the plan, as was recommended not to long ago by the president of the united states, no less. we want this negotiation to work. in order for it to work, mexico will take a look at what is labor practices are. our workers cap compete with a minimum -- cannot compete with the minimum wage in mexico. he has not gone up since the beginning of nafta. they will have to make deep considerations. mexicoout every union in is controlled by the federal government. canada come on the other hand -- we met with prime minister trudeau last week. he has a very excellent proposal in terms of labor negotiations that would help the workers of all countries, all three countries involved in these negotiations. i have faith that we can move in
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that direction. whether mexico will go, i don't know. vonnie: it sounds like you could be faced with the president at the administration to carry on these negotiations and help them along -- rep. pascrell: remember, article one, section eight, is very clear. if the president ignores the --gress, it only brings us and only brings us in at the end, and that is not going to work. those days are over. vonnie: of the briefs you have received so far, are you satisfied? rep. pascrell: no, i'm not. the administration has not done well in terms of transparency. it is very specific what has to happen. there has to be a transparent method. , theegotiators representative, and the commerce secretary, have to report back to the congress after every negotiation. that is not happening. this is the same trial the past
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administrations have used. this congress is not going to tolerate that. we need to change in our agreements. we want the agreements to be very clear, very transparent. this administration has not been transparent so far. and yet we will hit the most difficult problems now. we are going to get into the most difficult problems of trade between the fourth round and the sixth round, and who knows what is going to happen? vonnie: sounds like you don't know what the administration is going to present next -- rep. pascrell: a very broad scenario of what they are presented to us, nothing specific. -- vonnie: what about what we are reporting today, the series of ultimatums, effectively trying to phase out the canadian dairy system? is that something congress would be happy with it it would affect canada like that?
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rep. pascrell: no, we have to think of our own and canada knows that. we talked to prime minister trudeau about those things. he knows we need to see some changes and he has provided a roadmap. i think he is sincere about that. we talked also to the mexican authorities. they know we will not simply say, let's have some changes around the edges of this nafta deal. the nafta deal has not been good for mexico, has not been good for the united states, and it hasn't really been that good for canada. vonnie: far from hoping that other countries will raise wages, what specific requests would you want to see? rep. pascrell: the whole purpose of us renegotiating is to help manufacturers in the united states of america and the industries, so that workers don't have stagnant wages. if it happens like that, i don't care what changes they make, i won't support it. vonnie: sounds like you are waiting for something to come out as opposed to proactively -- out,pascrell: we have laid
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from the very, very beginning, we have been very clear with the principles should be, whether you are talking about labor, environment, whether you are talking about transparency, whether you are talking about the internet, either property -- private property, we have done all of that. vonnie: i want to move on to the congressional agenda. isis not moved on the risk this at the risk -- briskest case. rep. pascrell: the path was set for the way they handled for the care act. vonnie: they? rep. pascrell: the administration. tax cuts for the folks who don't need it the most. that is not acceptable. they put themselves in a bind when they did that. they cast a cloud over all the other issues that were to come, such as the question of whether we are going to have reform in our tax system.
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vonnie: do you see that happening? rep. pascrell: well, i will be very active in dispute and a member of the ways and means is active in this. i am a member of the ways and means committee. we are not going to give away the store. we will not go down the path that the president has designed -- he is the architect of saying, we get the guys at the top whatever they want -- vonnie: you are saying -- rep. pascrell: that doesn't apply anymore. vonnie: you say that everything the administration is saying right now doesn't fly with you in the house? rep. pascrell: back in 2007, we accepted lower corporation taxes. i don't accept it going to 15%. i think it is too big of a payout. i don't think it is worth it putting us into deficit because the consequences of that down the line is going to be dreadful for particularly the middle class. i'm looking to help primarily
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the middle class. they have standard wages and we need to change that and we will not change it with trickle-down politics of the past. vonnie: a democrat and deficit hawk, bill pascrell, thanks for joining. ranking member of the house ways and means trade subcommittee. coming up, our stock of the hour. u.k. in a timid giant rolling is falling sharply today. -- entertainment giant merlin is falling shortly today. mark: geopolitical events are heading home for the owner of attractions. this is bloomberg. ♪
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mark: live from london, i am mark barton. vonnie: in new york, i am vonnie
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quinn, and this is "bloomberg markets. time for stock of the" hour, arebsolutely plunging today u.k.-based merlin entertainment. breaking down the plunge is abigail doolittle. the company offered a disappointing update on the tda fors, saying that ebi the four-year year will be below estimates, $470 million, $480 million, versus the estimate of $490 million. it has attractions like lego tussaud.ame a pro rata terror threat is taking a toll. there's apparently the terror threat is taking a toll. the ceo said that the terror threat is not going away. plus, tougher employment situation in the u.k. is hurting, and would you believe it, whether -- it was a bad
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summer in england and italy and hurricanes in florida. they hurt florida attractions. they are taking a hit from all sides. mark: abigail, how our competitors faring in the environment? of the competitors are faring a little bit better on a year to databases, certainly a 12-month -- year to date basis, certainly a 12-month basis. marilyn is down on that basis. the company is forced to changes investment plan. intoad of investing money midway attractions, they are building out hotel rooms, because they say that will help make their resorts into short-term destinations, as opposed to day trips. they are trained to do a bit of a shift there. lande will soon have lego in new york by the end of 2020. that is the one segment that it will -- did well.
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vonnie: it's a date. mark: coming up, kenyans headed to the polls next week after the nove nullified electi. we will speak to the central government.
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vonnie: live from new york and london, i am vonnie quinn. mark: i am mark barton. this is "bloomberg markets" on bloomberg television. earlier this month kenya was thrown into turmoil when the -- highest court nullified election results. violent protests ensued. today the main opposition group is calling for a suspension of demonstrations after a series of killings the country's central bank is weighing the
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impact of the insurgency, and they have slightly lower the 2017 economic growth forecast. want to welcome governor patrick njoroge. always uncertainty with the upcoming elections. what do you do to assuage concerns of businesses and investors about what happened in the upcoming elections? patrick: the most important thing is to make sure that the markets continue to function normally. from that perspective first and foremost, you have the liquidity markets, or the money markets. those have been functioning quite well. it is true, at this moment there is tightness -- meaning there is a tight liquid to the situation -- liquidity situation. but it has nothing to do with the political circumstances. hasforeign exchange market been working very well. we have a flexible exchange rate regime and that has worked in our favor even during this time.
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and then of course, the other side, which is communicating a sense of normalcy, sense of continuity, and pointing to the opportunities that are in the economy in the medium-term. mark: how do you communicate that message went political clouds remain? there could be further instability, there could be violence. how do you communicate the strategy you clearly want to communicate against that backdrop? to make a point that on the political questions that are there, there are competent officers that are dealing with them. from that perspective, you have the courts, you have the various political parties. oft is a mature process democracy. so that is first and foremost. the outcome of it will be in
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line with the processes that are in place. that is the first thing. i think in that sense, it underscores the strength of institutions. that is important. secondly, we have been communicating the things we have been doing in terms of the markets. but also, communicating with various investors, various groups. i just came back from washington, d.c., where i had an opportunity to talk to a wide swath of investors, policymakers from other countries, and so forth. and also to understand what it is mark: move away from politics and to inflation. do you have any concerns about the combination of the drought, which hurts coffee production, worm outbreak on food production?
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do they have knock on effects on food costs? what is the effect on inflation? patrick: inflation over the last two months has been largely driven by food inflation, and that is a consequence of the , the largest drug in several years -- actually, more than 10 years, more than a decade. in terms of the supply of products into the market, because of the agricultural knewction just fell, we that directly on inflation, that has been driving the headline number. however, if you look at other prices and other commodities and look at the nonfood inflation, that is well below 5%. it is well anchored. thatve communicated inflation will not have knock on effects on other things if we
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can manage our monetary policy correctly. we are not worried about that, and actually, at this moment, inflation is well anchored. anchoredlation is well to move interest rates within 10%? patrick: inflation is one of the when wene considers consider the stents in terms of the monetary policy, and therefore, interest rates. i think the other factors that need to be considered -- obviously, one could also think as to where the economy is on the cycle. ,s you can see at this moment we are a bit soft. we have come in considering what to do in terms of room for increasing or lowering rates, the issues that now we have our
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monetary policy complicated by interest-rate cuts. based on concern about the direction of policy, in order to produce, let's say, a stimulus, or for that matter, and accommodative policy. mark: we have to leave you here, but please pop in the next time you're in london. patrick njoroge, central bank governor of can you could vonnie -- of kenya. funny, with breaking news. vonnie: canada and mexico are set to reject the u.s. nafta proposals, according to cnbc. loonie and dollar-peso spike. this is bloomberg. ♪
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♪ mark: it is 11:00 a.m. in new ,ork, 11:00 p.m. in hong kong 30 minutes left to the trading day in europe. i am mark barton. vonnie: i am vonnie quinn.
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this is the european close on bloomberg markets. ♪ mark: here are the top stories we are covering from the bloomberg. u.k.,ion heats up in the reaching 3% for the first time in more than five years. should credit suisse be doing more to create value for shareholders? aswill hear from both sides the banking giant makes slow progress on its turnaround plan. we are going to hit the road with the president of general motors, dan ammann. automaker is making a push into autonomous vehicles and ridesharing. when will they see a pair -- a payoff? have a look at where european equities are trading now, 3

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